1. SLM Corporation
American Securitization Forum
2009 Conference
February 9, 2009
2. Forward Looking Statements
This Presentation contains forward-looking statements and information based on management‟s current expectations as of the date of this document. Statements that are not
historical facts, including statements about our beliefs or expectations and statements that assume or are dependent upon future events, are forward-looking statements. Forward-
looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking
statements. These factors include, among others, the occurrence of any event, change or other circumstances that could give rise to our ability to cost-effectively refinance asset-backed
financing facilities due April 2009, (collectively, the “2008 Asset-Backed Financing Facilities”), including any potential foreclosure on the student loans under those facilities following
their termination; increased financing costs; limited liquidity; any adverse outcomes in any significant litigation to which we are a party; our derivative counterparties terminating their
positions with the Company if permitted by their contracts and the Company substantially incurring additional costs to replace any terminated positions; changes in the terms of student
loans and the educational credit marketplace (including changes resulting from new laws and regulations and from the implementation of applicable laws and regulations) which, among
other things, may change the volume, average term and yields on student loans under the Federal Family Education Loan Program (“FFELP”), may result in loans being originated or
refinanced under non-FFELP programs, or may affect the terms upon which banks and others agree to sell FFELP loans to the Company. The Company could be affected by: various
liquidity programs being implemented by the federal government; changes in the demand for educational financing or in financing preferences of lenders, educational institutions,
students and their families; incorrect estimates or assumptions by management in connection with the preparation of our consolidated financial statements; changes in the composition
of our Managed FFELP and Private Education Loan portfolios; changes in the general interest rate environment, including the rate relationships among relevant money-market
instruments, and in the securitization markets for education loans, which may increase the costs or limit the availability of financings necessary to initiate, purchase or carry education
loans; changes in projections of losses from loan defaults; changes in general economic conditions; changes in prepayment rates and credit spreads; and changes in the demand for
debt management services and new laws or changes in existing laws that govern debt management services. All forward-looking statements contained in this Presentation are qualified
by these cautionary statements and are made only as of the date of this filing. The Company does not undertake any obligation to update or revise these forward-looking statements to
conform the statement to actual results or changes in the Company‟s expectations.
“Core Earnings” Performance Measures - The following presentation includes “Core Earnings” performance measures. A presentation of the most comparable GAAP financial
measures and a reconciliation of the “Core Earnings” performance measures to the most directly comparable GAAP financial measures are included in the our most recent quarterly
earnings release, quarterly earnings report on Form 10-Q and annual report on Form 10-K, which are available on our website at
(http://www2.salliemae.com/investors/stockholderinfo/earningsinfo) and (http://www2.salliemae.com/investors/stockholderinfo/secfilings) and on the SEC‟s website (http://www.sec.gov).
U.S. Government Guaranteed Student Loans – The following presentation contains references to U.S. Government guaranteed student loans. All such references are to loans
made in compliance with the Federal Family Education Loan Program (“FFELP”), under Title IV of the Higher Education Act, to finance educational costs. As more fully described in our
most recent quarterly earnings release, quarterly earnings report on Form 10-Q and annual report on Form 10-K, available on our website at (http://
www2.salliemae.com/investors/stockholderinfo/earningsinfo) and (http://www2.salliemae.com/investors/stockholderinfo) and on the SEC‟s website (http://www.sec.gov), the federal
guarantee of FFELP loans is conditioned on loans being originated, disbursed and serviced in accordance with U.S. Department of Education regulations. In addition, unless a loan
default results from the borrower‟s death, disability or bankruptcy, the federal government guarantees no less than 97 percent of the principal balance plus accrued interest and the
holder of the loan generally must absorb the two percent (three percent after July 1, 2006) not guaranteed as a loss on the loan (“Risk Sharing”). FFELP loans serviced by a servicer
that has an Exceptional Performer designation from the U.S. Department of Education are not subject to Risk Sharing and receive 100% reimbursement on default claims (99 percent
reimbursement on default claims filed after July 1, 2006).
Additional Information - The following presentation contains certain information about the Company that management believes is important to investors, but should be read in
conjunction with other material information about the Company, including, but not limited to, the operational, funding, interest rate, political and regulatory, liquidity and credit risks that
the Company faces. For a discussion of the risks described above as well as additional information about the Company you should refer to our most recent quarterly earnings release,
quarterly report on Form 10-Q and annual report on Form 10-K, available on our website at (http://www2.salliemae.com/investors/stockholderinfo/earningsinfo) and
(http://www2.salliemae.com/investors/stockholderinfo/secfilings) and on the SEC‟s website (http://www.sec.gov). For a discussion of the specific characteristics of any specific security,
you should refer to the pricing supplement, prospectus supplement and/or prospectus applicable to that security.
2
3. SLM Corporation
• #1 originator of student loans in the U.S. education lending market
• #1 servicer and collector of students loans in the U.S. currently servicing $178 billion in
assets including $9 billion for third parties
• Fully independent private sector company with scale and a broad franchise, traded on
the NYSE
• $180 billion managed student loan portfolio, 81% of which is U.S. government
guaranteed(1)
• At year end, 82% of managed student loans were funded with term liabilities,
– 70% funded for the life of the loan
– 12% funded with fixed spread liabilities with an average life of 4.3 years
3
(1) As of December 31, 2008.
4. Life-stage Customer Strategy
• Sallie Mae offers an unmatched, integrated suite of saving, planning, paying and repaying
for college products and services
Early awareness and School selection, Life-of-loan guidance and
Complete 1-2-3
saving understanding ways to products to encourage
financing solutions for
pay with Education responsible repayment
schools and families
Investment Planner
Traditional SLM
loan products
4
5. SLM Corporation Update
Year Ended December 31, 2008
• Managed student loans outstanding increased to $180 billion, up 10% from year-
end 2007
– Internal Brand FFELP originations increased 48% in 2008
– Private Credit originations decline 20% in 2008 due to a more conservative credit and
funding position
• “Core Earnings” net income was $526 million versus $560 million in 2007
• New student loan legislation, ECASLA, passed by Congress in May 2008
– Provides broad authority to ED to purchase loans originated from 10/03 – 07/09
– Authority extended to include 2009 – 2010 academic year
– At 12/31/08, $7.4 billion of loans funded under these programs and $980 million of loans
sold directly to the ED
• Operating expenses declined 11% in 2008 to $1.3 billion
• Upromise manages $17.5 billion in 529 college savings plans with 10 million
members enrolled in the member rewards programs.
5
6. A Brief Corporate History
Congress creates the Guaranteed Student Loan
1965 Program (1)
Congress establishes, as a GSE, the Student Loan
1972
SLM Corporate Debt Ratings
Marketing Association or “Sallie Mae”
Moody‟s S&P Fitch
Long-Term Baa2 BBB- BBB
Privatization of Sallie Mae approved by Congress,
1996
Short-Term P-2 A-3 F3 SLM Corporation holding company created
Outlook Neg Stable Stable
SLM Corporation issues „single-A‟ rated unsecured
2000 corporate debt
Managed Loan Portfolio
Loan Type $B %
GSE dissolved… SLM Corporation becomes a fully
2004
FFELP Loans $146.9 81%
independent, private sector corporation
Private Education 33.5 19%
Total Portfolio $180.4 100%
SLM Corporation proposed transaction with J.C.
2007
Date as of 12/31/08
Flowers
Challenging economy; Government support of
2008 FFELP
(1) Currently known as the Federal Family Education Loan Program (FFELP).
6
7. FY08 and Q408 “Core Earnings” Summary
($ millions), except per share amounts 2008 2007 Q408 Q407
EPS (Reported) 0.89 1.23 0.08 (0.36)
Net Income (Loss) 526 560 65 (139)
Net Interest Income 2,419 2,555 553 612
Net Interest Margin 1.30% 1.49% 1.15% 1.32%
Loan Loss Provision 1,029 1,395 392 750
Asset-Backed Financing Facilities Fees 357 N.A. 83 N.A.
Fee Income 777 1,173 200 306
Operating Expenses 1,264 1,417 270 364
Tangible Capital Ratio 1.80% 2.00%
Average Managed Student Loans 174,244 154,130 180,990 161,769
EPS Breakdown 2008 2007 Q408 Q407
Reported quot;Core Earningsquot; 0.89 1.23 0.08 (0.36)
Impacted by:
Restructuring Charges (0.12) (0.03) (0.01) (0.03)
Purchased Paper Business (0.43) 0.10 (0.05) 0.03
Non-Recurring Accounting Assumption Adjustments 0.05 (0.06) - -
Merger Related Fees - (0.08) - (0.02)
7
9. Dept. of Education / Government Programs
• Kennedy-Miller Legislation – Signed by President 05/07/08
• ECASLA - Broad authority to purchase loans from 10/01/03 – 07/01/09
• ECASLA Extension – Signed by President 10/07/08
• Extended purchase authority for 2009 – 2010 Academic Year
• Loan Purchase Commitment Program - 5/21/08
• Eligible collateral – certain 2008 - 2009 FFELP loans
• Funded at CP +50 bps
• Par put + $75/per loan fee and origination fee rebate
• Program replicated to cover 2009 – 2010 originations 11/08/08
• ED Additional Loan Purchase Actions -11/20/08
• Program term 12/08 – 1/09, eligible collateral - certain 2007 – 2008 FFELP loans
• Purchase price of 97 – servicing released - program total of $6.5 B
• Conduit Program Under Development - Announced 11/08/08, Structured 1/19/09
• Provide liquidity support to ABCP conduit to fund certain FFELP loans
• Collateral originated 10/03 – 9/09 eligible
• Program term - 5yr and size unlimited
• Liquidity provided by the Federal Financing Bank (a division of Treasury)
• TALF – NY Fed and Treasury to provide consumer ABS support
• Eligible collateral – AAA rated Card, Auto, Small Business and Student Loan securities
• Includes Consolidation and Private Credit student loans originated post 5/1/07
• Fed to provide funding, rates and haircuts to be determined
• Program Term – 1 year unless extended with up to 3 yrs of financing
9
10. Liquidity Position Update
($ in billions) 12/31/2008 9/30/2008 12/31/2007
Sources of Primary Liquidity:
ED Purchase and Participation Program Unlimited Unlimited -
Unrestricted Cash & Liquid Investments $5.0 $4.7 $10.3
(1)
Unused Commercial Paper and Bank Lines of Credit 5.2 6.2 6.5
2008 FFELP ABCP Facilities 0.8 1.2 -
2008 Private ABCP Facilities 0.3 0.1 -
ABCP Borrowing Capacity - - 5.9
Interim ABCP Facility Borrowing Capacity - - 4.0
Total Sources of Primary Liquidity 11.3 12.1 26.7
Stand-by Liquidity:
Unencumbered FFELP Loans 5.2 9.0 18.7
Total Primary and Stand-by Liquidity (2) $16.6 $21.2 $45.5
At December 31, 2008 and September 30, 2008, excludes $308 and $328 million, respectively, commitment from Lehman
(1)
Brothers Bank, FSB, a subsidiary of Lehman Brothers Holdings, Inc. which declared bankruptcy on September 15, 2008. The
Company‟s line of credit commitments decreased by $1.0 billion effective October 23, 2008.
Numbers may not add due to rounding
(2)
10
11. Funding Sources
• Employ conservative long-term funding model
$180 Billion Managed Student Loan Portfolio
Term Funded*
70%
Fixed Spread
Liabilities
w/Ave Life of
4.3 yrs
12%
ABCP Conduit
18%
* Term Funded includes 4% or $7.6 Billion of advances outstanding under the ED Purchase and Participation Program @ 12/31/08
11
12. Funding Distribution
• At December 31, 2008, total managed debt borrowings was $192 billion.
Unsecured Debt,
$38.0
Churchill ABCP ,
$22.9
DOE Facility, $7.4
Term Bank
Deposits $2.3
FFELP Facility,
$1.9
Other, $0.2
Term ABS, $119.8
12
13. Sallie Mae Bank
• Bank charter
– Utah based ILC regulated by FDIC and Utah Department of Financial Institutions
(UDFI)
– Charter granted October 2005
• Current bank activity
– Originates Sallie Mae‟s private education loans
– Funded through affiliate and brokered deposits
– 46.3% Total Risk-based Capital at December 31, 2008
• Deposit taking activities
– Total deposits increased by 300% in 2008
– Deposits totaled $2.7 billion at 12/31/08
• $ 2.3 billion Brokered Deposits
• $450 million Affiliate Deposits
– Brokered Deposit portfolio has a weighted average maturity of 19.7 months
13
15. Sources of Funding for Higher Education in the U.S.
Sources of Funding for College Attendance – AY 2007-2008
Total Cost - $258 Billion
Federal Student
Parent/Student Loans
Contributions $74
$71
$18
$95 Private Education
Loans
Scholarships,
Grants, Other
Source: Based on estimates by Octameron Associates, “Don‟t Miss Out,” 32nd Edition; College Board, “2007 Trends in Student Aid”; and Sallie Mae. Includes tuition, room, board,
transportation and miscellaneous costs for two and four year college degree granting programs.
15
16. Favorable Student Loan Market Trends
• Enrollment Growth + Rising Tuitions + Education Value = Increasing Loan Demand
Higher Education Enrollment (millions) Annual Cost of Education ($ thousands)
Public Private
Public CAGR: 6.8%
Private CAGR: 5.1%
19.7 19.9 $34.1
19.3 19.5 $30.4
$28.7
18.8 19.0 $27.5
$26.1
18.4 18.6 $24.9
$23.9
18.2 $22.2
$21.5
17.8 18.0
17.3 17.5
$14.3
16.9
$12.8
$12.1
$11.4
$10.6
$9.7
$9.0
$8.1 $8.4
2000 2001 2002 2003 2004 2005 2006 2007 2008
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: College Board
Source: National Center for Education Statistics Note: Academic years, average published tuition, fees, room and board charges at four-year institutions; enrollment-
Note: Total enrollment in all degree-granting institutions; middle alternative projections for 2007 onward weighted
Federal Student Loan Origination Volume ($bn) Relationship Between Higher Education, Income and Employment
100,000 8%
‟01-‟07 CAGR: 11.4% 90,000
Average annual income 7%
‟07-‟13 CAGR: 6.5% $110.8
Unemployment
80,000
$104.3 6%
70,000
$98.2
$92.7 5%
$82.5 $87.4
60,000
$76.1 50,000 4%
$69.1
$59.3 $64.3 40,000
$52.2 3%
$45.3
$39.8 30,000
2%
20,000
1%
10,000
0 0%
Less than H.S. High school Some college Associate Bachelor's Master's Doctorate Professional
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: U.S. Census Bureau, Current Population Survey. Unemployment data as of 2006. Average annual income
Source: President‟s 2008 Budget. Gross commitments by fiscal year figures for 2005. Represents average earnings for a full time, year-round worker over age 25
Note: Excludes consolidation volume
16
17. The Federal Family Education Loan Program or “FFELP”
• Provides lenders an explicit U.S. government guarantee of at least 97% and a fixed
yield on student loans made pursuant to the FFELP program
• Loan pricing, terms and maximum borrowing limits set by Congress
• Available to undergraduate students, graduate students and their parents
• Fixed rate loans, with 10 to 30+ year maturities and payments typically deferred until
after graduation
• Borrower outstanding balances typically range from $5,000 to $25,000, although
balances exceed $100,000 for graduate students
17
18. Federal FFELP Student Loan Market Share
SLM Historical Market Share of
Federal Student FFELP Loan Federal Student FFELP Loan
Originations (FFY 2007 & 2003) Originations
2007 2003
40%
Market Market
Rank Lender 35% 34%
34% 34% 34%
34%
Share Share 35%
30%
1 Sallie Mae 34% 34% 30%
25%
2 Wells Fargo 10% 10%
20%
3 Citibank 8% 8%
15%
Bank of 10%
4 4% 6%
America
5%
0%
2002 2003 2004 2005 2006 2007 2008
(1) SLM Preferred Channel FFELP market share based on federal fiscal year 2002 and 2008 total FFELP net commitment figures. All figures for federal fiscal year ended
September 30. Source: U.S. Department of Education and SLSA Servicing Volume Survey.
18
19. Growth in Federally Supported Student Loan Originations
Growth in Federal Education Loan
Originations FY 2001 - 2009E (1)
Stable, Long-Term Growth –
$80.0
• In 2008, more borrowers took out more $70.0
FFELP loans with higher loan balances
than ever before $60.0
$50.0
•
($ billions)
Total federal student loan originations,
including both FFELP and FDLP loans, $40.0
increased by 9% in 2008, following a
15% increase in 2007 (1) $30.0
$20.0
• The U.S. Department of Education is
projecting 5% average annual growth in $10.0
federal student loan volume through
2009, without consideration for pending $0.0
increases in FFELP loan limits
Federal Student Loan Originations (Actual)
Federal Student Loan Originations (Projected)
(1) Source: U.S. Department of Education. Based on net commitments, fiscal year ended September 30. Includes both FFELP and FDLP loans.
19
20. FFELP Originations
• FFELP Internal Brand originations increased 48% in 2008
• Originated $2.7 billion of loans for third party servicing clients in 2008
SLM FFELP Originations
$20
$18
$16 $4.0
$14
$8.2
$12
$9.0
$10.3
$ in billions
$10
$10.1
$8
$13.8
$6
$9.3
$4
$6.9
$4.8
$2 $3.6
$0
2004 2005 2006 2007 2008
Internal Brands Lender Partners
20
21. SLM FFELP ABS Issue Characteristics
Typical SLM FFELP ABS Transaction Features Unique Characteristics of FFELP Loan ABS
•
• Explicit U.S. government guarantee of
Historical issue size of $1.0B to $5.0(+)B
underlying collateral insulates bondholders
• from virtually any loss of principal (1)
Tranches denominated in US$ or Euros
• Formerly a 20% risk-weighted asset, now a
• „Aaa/AAA/AAA‟ rated senior tranches make <10% risk-weighted under Basel II‟s IRB
up 97% of issue structure
methodology
• •
Floating rate tied to 3 mo. LIBOR, with Offer significantly higher spreads than
occasional fixed rate issuance government agency securities with
comparable risk profiles
• Amortizing tranches, with 1 to 15(+) year
•
average lives Short (1-3 yrs), intermediate (3-7 yrs), long
(7-10 yrs) and very long (10-15+ years) term
• Serviced by Sallie Mae, Inc. tranches available at new issue and in
secondary
(1) Principal and accrued interest on underlying FFELP loan collateral carry a guarantee of either 98% or 97%. Guarantee is dependent on meeting the servicing requirements of the U.S.
Department of Education.
September 2008 21
22. Recent FFELP ABS Structures
Recent SLM New Issue FFELP ABS Structures
Non-Consolidation FFELP Non-Consolidation FFELP Consolidation FFELP
Issue: $4.1B SLM Trust 2008-9 $1.0B SLM Trust 2008-8 $1.6B SLM Trust 2007-8
Closing Date: August 28, 2008 August 5, 2008 November 30, 2007
Collateral: US Govt. Guaranteed FFELP Stafford US Govt. Guaranteed FFELP Stafford US Govt. Guaranteed FFELP
and PLUS Loans and PLUS Loans Consolidation Loans
Initial Pricing
Negotiated 12% CLR Ramp (0%-8%) over 10 years
1:
CPR
1 1 1
Moody's Amt AL Pricing Moody's Amt AL Pricing Moody's Amt AL Pricing
Tranching: A Aaa $3,964 4.55 L+160 A1 Aaa $264 1.0 L+50 A1 Aaa $259 2.0 L+23
B2 Aa1 $123 9.16 L+225 A2 Aaa $307 3.0 L+90 A2 Aaa $234 5.0 L+33
A3 Aaa $145 5.0 L+115 A3 Aaa $135 7.0 L+38
A4 Aaa $237 7.4 L+150 A4 Aaa $430 10.0 L+47
B2 Aa1 $29 8.5 L+225 A5 Aaa $453 16.0 L+55
B1 Aa1 $47 12.6 L+100
1 Estimated based on a variety of assumptions concerning loan repayment behavior, as more fully described in the related prospectus, which may be obtained at
http://www2.salliemae.com/investors/debtasset/slmsltrusts/. Actual average life may vary significantly from estimates.
2 Tranch retained by Sallie Mae
22
23. SLM Stafford/PLUS ABS Trusts
Prepayment Analysis
• Annualized CPRs for SLM Stafford/PLUS ABS Trusts have decreased significantly as incentives for
borrowers to consolidate have declined
Historical SLM Stafford/PLUS ABS CPRs
50.0%
45.0%
Average CPR*
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2003 2004 2005 2006 2007 2008
50.0%
Average CPR*
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
1 2 3 4 5 6
Years Since Inception
2002 Trusts 2003 Trusts 2004 Trusts 2005 Trusts 2006 Trusts 2007 Trusts 2008 Trusts
* Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for years ended December 31.
Quarterly CPR assumes School and Grace loans are not scheduled to make payments. Deferment, Forbearance and Repayment loans are scheduled to make payments.
23
24. SLM Consolidation ABS Trusts
Prepayment Analysis
• CPRs for SLM Consolidation ABS Trusts have declined significantly following legislation that prevented
in-school and re-consolidation of borrowers‟ loans
Historical Consolidation ABS CPRs
20.0%
Average CPR*
17.5%
15.0%
12.5%
10.0%
7.5%
5.0%
2.5%
0.0%
2003 2004 2005 2006 2007 2008
20.0%
Average CPR*
17.5%
15.0%
12.5%
10.0%
7.5%
5.0%
2.5%
0.0%
1 2 3 4 5 6
Years Since Inception
2002 Trusts 2003 Trusts 2004 Trusts 2005 Trusts 2006 Trusts 2007 Trusts
* Average CPR is the simple (non-weighted) average of four Quarterly CPR calculations for years ended December 31.
Quarterly CPR assumes School and Grace loans are not scheduled to make payments. Deferment, Forbearance and Repayment loans are scheduled to make payments.
24
25. The Private Education Loan Market
Private Education Loans
• Consumer loans made to students and parents specifically to fund the cost of
undergraduate, graduate and other forms of post-secondary education
• Typically used to bridge the funding gap between grants, aid and FFELP loans, and
the increasing cost of higher education
• Supplement U.S. Government guaranteed student loans, but not guaranteed by the
U.S. Government
• Typically offered with floating interest rates, with loan margins set based on the
credit quality of the borrower
• Generally 5 to 15 years in maturity, with terms similar to those offered under the
guaranteed student loan program
25
26. SLM‟s Private Education Loan Portfolio
Private Education Loan Portfolio Characteristics(1)
• $33 billion of managed outstandings at year end 2008
• 19% of SLM‟s managed student loan portfolio
• Risk-based pricing
• Approximately 55% of portfolio has a co-borrower, typically a parent
• Higher education loans typically non-dischargeable in bankruptcy
• Integrated underwriting, servicing and collections
(1) All figures for the fiscal year ended December 31, 2008.
26
27. Private Education Loan Market Demand
• Private education loans help bridge the gap between funding available through government-
sponsored programs and the rapidly increasing cost of education
Cost of College AY 2008-2009
Cost of College AY 1998-1999
Based on a Four-Year Term
Based on a Four-Year Term
$136,528
$110,320
Cost of Cost of
attendance attendance
gap gap
$57,332
$41,884
$31,000 $31,000
$17,125 $17,125 FFELP Limit FFELP Limit
$31,000 $31,000
FFELP Limit FFELP Limit
$17,125 $17,125
Full-Time Private School Full-Time Public School
Full-Time Private School Full-Time Public School
Source: College Board, Trends in College Pricing, 2008.
27
28. Private Credit Originations
SLM vs Industry Originations
$20.0 $18.5
$18.0 $17.0
$16.0
$13.8
$14.0
($ in Billions)
$12.0
$10.1
$10.0
$7.9
$7.6 $7.4
$8.0
$6.3
$6.2
$6.0
$4.3
$4.0 $3.3
$2.0
$0.0
2003 2004 2005 2006 2007 2008
SLM Total Market *
* Source: College Board, Trends in Higher Education Series (2007), 2008 industry data not available
28
29. Rating Actions on SLM Private Credit Student Loan ABS
• There have been a number of upgrades and no downgrades to Sallie Mae‟s Private
Credit ABS since the program‟s inception in 2002
Moody‟s(1) - March 2007 Fitch - September 2007 S&P - July 2008
Previous Current Previous Current Previous Current
Deal Tranche Rating Rating Deal Tranche Rating Rating Deal Tranche Rating Rating
2002-A B A1 Aa3 2002-A B A AA+ 2002-A B A AA
2002-A C Baa1 A3 2002-A C BBB A+ 2002-A C BBB A
2003-A B A1 Aa3 2003-A B A+ AA
2003-A C Baa1 A3 2003-A C BBB+ A
2003-B B A1 Aa3 2003-B B A+ AA
2003-B C Baa1 A3 2003-B C BBB+ A
2004-A B A1 Aa3 2003-C B A+ AA
2004-A C Baa1 A3 2003-C C BBB+ A
2004-B B A1 Aa3 2004-A B A+ AA
2004-B C Baa1 A3 2004-A C BBB+ A
2004-B B A+ AA
2004-B C BBB+ A
(1) On September 17, 2008, as a result of Lehman's bankruptcy and rating downgrade, Moody's placed all of the tranches from the SLM Student Loan Trust 2004-1
transaction on review for possible downgrade. Lehman Brothers Special Financing Inc. acted as interest rate swap provider for the class A-6 reset rate notes. The
Lehman interest rate swap expires in January 2009 and is fully cash collateralized.
29
30. Private Credit Loan Underwriting Criteria
• Underwriting has recently been intensified and enhanced with school-based decision
criteria
Current(1)
December 2007
Xxxx FICO xxxx Other FICO Other
Undergraduate > 640 Borrowing limits - Seven FICO tiers Borrowing limits school
Undergraduate: $100,000 based on school type and specific
and Graduate Graduate: $150,000 Federal Loan
default rates
Exceptions for borderline Absolute minimums - Exceptions discontinued
and serial borrowers
School meets eligibility
requirements i.e. Title IV and
Not-For-Profit Schools: accredited
FICO > 660
For-Profit Schools:
FICO > 700
Direct-To-Consumer > 640 Aggregate limit: $130,000
Temporarily suspended, expected to resume when
funding environment improves
Private Credit > 640 Graduates only
Consolidation
Aggregate limit: $275,000
(1) As of January 2009
30
31. Private Credit Loan Collections
• Sallie Mae services and collects the loans in its Private Credit ABS Trusts
• Private credit collections are conducted by a stand-alone consumer credit collections
unit, not the company‟s FFELP collections operations
• Managed by individuals with prior experience managing collections operations for
consumer loan assets
• Over the past 18 months, private credit collections resources have been significantly
increased and collections technology and practices enhanced
• Multi-variable analysis has enabled prioritization of collection efforts on higher risk
borrowers
• Forbearance policy has been revamped, with eligibility and duration based on a risk-
based decision tree model
31
32. Forbearance
• A collections tool used to provide borrowers time to improve their ability to repay
– Between graduation and start of first job
– Economic hardship
• Provides borrower with time to obtain employment and income to support their
obligations
• Applied most frequently in the first two years of repayment
• Granted for three month intervals, up to a maximum of 24 months
• Majority of loans are in forbearance for less than 12 months
• Placing a loan in forbearance suspends payments, with interest capitalized to the
loan balance
32
33. SLM Private Credit Delinquency and Forbearance Seasoning Trends
• Delinquency and forbearance are highest when loans enter repayment, and diminish as loans season
• As the trust loans season, delinquency and forbearance are expected to decline
Forbearance, % of Loans in Repayment and
90+ Day Delinquencies, % of Loans in
Repayment Forbearance
SLM Private Credit Trusts SLM Private Credit Trusts
45.0% 6.0%
25.0% 20.0%
40.0% 18.0%
5.0%
35.0% 20.0% 16.0%
Percent Seasoned
Percent Seasoned
Forbearance %
14.0%
30.0% 4.0%
>90 dpd %
15.0% 12.0%
25.0%
3.0% 10.0%
20.0%
10.0% 8.0%
15.0% 2.0%
6.0%
10.0%
5.0% 4.0%
1.0%
5.0% 2.0%
0.0% 0.0% 0.0% 0.0%
0-12 13-24 25-36 37-48 49-60 61-72 0-12 13-24 25-36 37-48 49-60 61-72
Paym ents Made Time in Repayment
Current Seasoning Current Forbearance
Current Seasoning Current Delinquency
Note: Based on historical data through December 31, 2008
33
34. SLM Private Credit Default Emergence Profile
• Defaults in SLM Private Credit ABS Trusts increase as loans first enter repayment, then diminish
steadily over time
Expected Loss Emergence Timing
99% 100%
98%
97%
96%
100.0% 94%
92%
89%
90.0% 85%
78%
80.0%
69%
Percent of Total Defaults
70.0%
55%
60.0%
50.0%
38%
40.0%
30.0% 24%
18%
20.0% 14% 14%
12%
9% 7%
10.0% 4% 3% 2%
2%2% 2% 1% 1% 1% 1%
0.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Years in Repayment
Defaults Per Repayment Year Cumulative Default
Based on historical data thru June 30, 2008
34
35. SLM Private Credit Gross Defaults: Actual-To-Date vs. Current Lifetime Expectations
Actual-to-Date Cumulative Gross Defaults and Current Lifetime Expectations,
including Bankruptcy Information
All Trust Loans
14.0%
11.7%
12.0%
9.9%
9.8%
Percent of Original Pool Balance
9.4%
10.0%
8.7%
8.6%
8.5%
8.1%
7.7%
7.4%
8.0%
6.7%
6.1%
5.52%
6.0%
5.15%
5.18% 4.87% 4.80%
3.84%
3.55%
4.0% 4.47%
4.41% 4.33%
4.08% 4.01%
2.24% 2.17%
3.08% 1.93%
2.82% 1.62%
2.0%
0.92%
1.66% 1.53%
1.33%
1.11%
0.44%
0.0%
2002-A 2003-A 2003-B 2003-C 2004-A 2004-B 2005-A 2005-B 2006-A 2006-B 2006-C 2007-A
Charge-off - 212+ days delinquent (1) Bankruptcy or death - now current or paid off (2) Bankruptcy or death - other (3) Current Lifetime Expected Loss (4)
For SLM Private Credit Student Loan Trusts issued prior to 2005-B, the servicer has the option, but not the obligation, to repurchase loans that (i) become 180+ days delinquent and/or (ii) have a
borrower who filed for bankruptcy or died . Prior to November 1, 2008, the servicer exercised this repurchase option and actual charge-offs in these trusts equaled zero. Beginning November 1,
2008, the servicer ceased purchasing from the trust loans that are more than 180 days delinquent. For the purposes of comparison across all deals, this chart reflects trust charge-offs for SLM
Private Credit Student Loan Trusts issued prior to 2005-B as if the servicer had never exercised its repurchase option.
Charge-offs per the servicer’s portfolio definition which is generally 212+ days delinquent. Includes loans for which a borrower has filed bankruptcy which have subsequently become 212+ days
(1)
delinquent.
Charge-offs due to a borrower’s bankruptcy filing for which the loan is now current or paid off.
(2)
Charge-offs due to a borrower’s bankruptcy filing or death for which the loan is not current or paid off but has not become 212+ days delinquent. These loans are in various statuses including:
(3)
bankruptcy stay, deferment, forbearance or delinquency.
Based on historical data thru November 30, 2008
35
36. SLM Private Credit Gross Defaults: Current Lifetime Expectations vs. Constraining
Rating Agency Stress Levels at Issuance
Constraining Rating Agency Stress Levels at Issuance for 'AAA' and 'A' Ratings versus
Current Lifetime Cumulative Gross Default Expectations
All Trust Loans
45.0%
40.0% 36.6%
33.8%
35.0%
Percent of Original Pool Balance
29.4%
27.7% 27.7% 27.6%
30.0% 27.2% 27.1%
26.4%
26.0% 25.6%
25.4%
25.0%
24.7%
24.2%
20.0% 22.0%
21.7% 21.6% 20.9%
20.4% 20.1%
20.0% 19.9% 19.4%
19.2%
15.0%
10.0% 11.7%
9.8% 9.9%
9.4%
8.7%
8.6%
8.5% 8.1%
7.7%
5.0% 7.4%
6.7%
6.1%
0.0%
2002-A 2003-A 2003-B 2003-C 2004-A 2004-B 2005-A 2005-B 2006-A 2006-B 2006-C 2007-A
Current Lifetime Gross Current Loss Expectation (1) Single A (Constraining Level) AAA (Constraining Level)
Charge-offs per the servicer’s portfolio definition which is generally 212+ days delinquent. Includes loans for which a borrower has filed bankruptcy which have
(1)
subsequently become 212+ days delinquent.
Source: Sallie Mae, based on historical data thru November 30, 2008
36
37. SLM Private Credit ABS Trusts: 90+ Day Delinquencies
• Upward trend in delinquencies for newer trusts is driven by a higher percentage of loans first entering
repayment, when borrowers are most likely to become delinquent
90+ Day Delinquencies as a Percent of Loans in Repayment
All Loans in SLM Trusts by Year of Issuance
5.0%
Percent of Rpmt Balance
4.0%
3.0%
2.0%
1.0%
0.0%
02
03
04
05
06
07
08
03
04
05
06
07
08
03
04
05
06
07
08
3
4
5
6
7
8
-0
-0
-0
-0
-0
-0
v-
v-
v-
v-
v-
v-
v-
g-
g-
g-
g-
g-
g-
b-
b-
b-
b-
b-
b-
ay
ay
ay
ay
ay
ay
No
No
No
No
No
No
No
Au
Au
Au
Au
Au
Au
Fe
Fe
Fe
Fe
Fe
Fe
M
M
M
M
M
M
Percent of Rpmt Balance
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1
2
3
4
5
6
7
8
9
Quarters Since Inception
2002 2003 2004 2005 2006 2007
37
38. SLM Private Credit ABS Trusts: Forbearance
• Use of forbearance as a collection tool peaked in early 2008, and has declined since, primarily as a
result of restrictions on the length of forbearances granted
• Forbearance usage is typically highest when loans enter repayment, and declines as loans season
Loans in Forbearance as a Percent of Loans in Repayment and Forbearance
All Loans in SLM Trusts by Year of Issuance
25.0%
Percent of Rpmt+Forb
20.0%
15.0%
10.0%
5.0%
0.0%
02
03
04
05
06
07
08
03
04
05
06
07
08
03
04
05
06
07
08
3
4
5
6
7
8
-0
-0
-0
-0
-0
-0
v-
v-
v-
v-
v-
v-
v-
g-
g-
g-
g-
g-
g-
b-
b-
b-
b-
b-
b-
ay
ay
ay
ay
ay
ay
No
No
No
No
No
No
No
Au
Au
Au
Au
Au
Au
Fe
Fe
Fe
Fe
Fe
Fe
M
M
M
M
M
M
25.0%
Percent of Rpmt+Forb
20.0%
15.0%
10.0%
5.0%
0.0%
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
1
2
3
4
5
6
7
8
9
Quarters Since Inception
2002 2003 2004 2005 2006 2007
38
